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CJR’s Ryan Chittum picks up on one of my pet peeves:

The Wall Street Journal goes page one with a misleading story about gold, splashing this headline across four columns atop the page:

       Gold Vaults to New High

Gold hit $1,306 an ounce yesterday, which is a nominal record. Emphasis on nominal. That doesn’t mean anything, really. The real record was set thirty years ago at $2,318 in 2010 dollars. The Journal, incredibly, doesn’t mention this once in its story. This isn’t just an institutional knowledge failure, it’s one of numeracy.

With rare exceptions, inflation-adjusted prices should always be considered the baseline when you’re reporting on trends. I know that it can make for clumsy writing, but that’s life. It’s the right thing to do, and nominal prices should be the ones in parentheses if you need to include them. Adjusted for inflation, gold peaked 30 years ago at a daily fix of about $2,300 and a monthly average of about $1,800. We’re still quite a ways from that record.

However, this is an excuse for me to ask about something else: what is the deal with gold, anyway? I understand that historically it responds to panics, which explains why gold prices have been rising for the past couple of years. But why did it double between 2001 and 2008? Those were nice, low-inflation times, not the kind of environment that’s usually friendly to gold bugs. What’s the story here?

UPDATE: Via comments, a reminder that not everything is about us. China deregulated gold ownership in 2001, and since then demand in both China and India has boomed. So perhaps that’s (part of) the answer.

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